SouthWest Analysis
Case Analysis of Southwest Airlines * The hub-and-spoke model used by the nation's largest airlines was designed to extract high fares from customers while moving them seamlessly to points around the globe.* By the end of 2000, the cracks in the hub-and-spoke model became evident. Both business and leisure travelers began seeking cheaper airfares. Increased fuel costs, fewer travelers, and the high labor costs they had granted to keep peace with the unions trapped the major airlines.* The continued tough airline market in 2002 gives a boost to low-cost airlines, which now fly 32 percent of domestic passengers. These airlines include AirTran, ATA, Frontier, JetBlue, and Spirit. Southwest is by far the oldest and largest of the low-cost airlines. * Southwest Airlines has a history of being aggressive during tough times. Looking at the airline industry one month after the terrorist attacks of September 11, 2001, Southwest was repeating this behavior. Instead of cutting costs by reducing its flight schedule and laying off workers, Southwest kept all its employees and flights. Management cut costs by delaying delivery of 11 new Boeing 737s and reducing travel-agent commissions.
The excessive expenses of the hub-and-spoke model are taking its toll on the largest airlines during the current downturn. Those seats are covered with leather, and they each have a TV screen in their backs with 24-channel Direc TV connections. Southwest must provide additional services to remain competitive: Southwest must meet the current and forecasted demand, find sufficient facilities, keep their strategy coherent and consistent, and ensure that the entry into a new market is timely and before it's competitors. This gave JetBlue many of the advantages that Southwest enjoyed: low maintenance and crew training costs, fast plane turnaround, and higher employee productivity. Southwest should look to expand its services to outside the airline industry and be the first airline to promote business lounges at airports for day-meetings. The Direc TV connections cost about $1 per passenger, far less than the price of serving that passenger a meal. It's planes flew 78 percent full during January 2004 compared to 82 percent full during January 2003. Southwest has experienced an extraordinary in traffic growth over the past five years, about 20-30% annually. This low-cost carrier displayed many of the traits seen in Southwest Airlines: one type of plane (the Airbus A-320), point-to-point service instead of the hub-and-spoke model, and high reliance on online ticketing. uthwest emphasizes an easy-going, relaxed corporate style that provides employees with extensive operational independence. They should also use code sharing as a way to transfer folks from one hub to another, rather than transferring travelers to their hub first and then to their final destination. United lost $47 on every passenger that boarded one of its planes. The airline burned through an average $7 million of cash each day while rival American Airlines burned $4 million to $5 million per day.
Common topics in this essay:
Southwest Airlines,
Solutions/Recommendations Modified,
III Causes,
JetBlue Southwest,
Vikas Kapoor,
Southwest Southwest's,
American Airlines,
United Delta,
Conclusions Southwest's,
JetBlue's A-320s,
southwest airlines,
major airlines,
hub-and-spoke model,
airline industry,
code sharing,
direc tv connections,
percent industry's,
term strategies,
short term,
tv connections cost,
low-cost airlines,
september 11 2001,
september 11,
provide additional services,
short term strategies,
|
Acceptance Essays
